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Blue Label Telecoms predicts earnings jump

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Blue Label Telecoms joint-CEOs Mark and Brett Levy.
Blue Label Telecoms joint-CEOs Mark and Brett Levy.

Blue Label Telecoms has predicted its half-year headline earnings will increase by at least 20% per share.

In a trading statement released on the Johannesburg Stock Exchange, the company says it expects the financial results for the six months ended 30 November 2019 to increase by more than 20% in comparison to the previous corresponding reporting period.

Blue Label says this translates to basic, headline and core headline earnings per share improving by at least 2.52c, 3c and 2.28c compared to the reported losses on basic, headline and core headline per share of 12.59c, 15.02c and 11.39c achieved as at 30 November 2018, respectively.

In the six months ended November 2018, fair value losses totalling R493 million and the group’s share of equity accounted losses in Cell C amounting to R133 million were recognised.

Blue Label became Cell C’s largest shareholder after acquiring a 45% stake in 2017. Cell C has battled to make consistent profits since it became SA’s third mobile operator 19 years ago.

In September, the telco reported a loss of R8 billion for the year ended May 2019. The record loss placed the company among the few in the country that have posted such huge losses, including Eskom, which recorded a R20 billion loss in one year.

Although they quit the Cell C board last year, the Levy brothers – Brett and Mark, who are joint-CEOs of Blue Label Telecoms – took responsibility for the mess at the mobile operator.

The embattled telco’s net debt, excluding finance leases, had ballooned from R7.44 billion to R8.24 billion, which Cell C claims was driven by increased capital expenditure and working capital drawdown facilities.

Cell C has been under pressure for some time, facing myriad problems, including job stoppages, declining revenue and debt management challenges.

In June, the operator was downgraded by global rating agency Standard & Poor’s (S&P) after the operator renegotiated terms of its R1.4 billion debt.

In August, S&P downgraded it for the third time for its debt profile.

In April, the agency lowered Cell C’s issuer credit rating to CCC- from CCC+, placing it deeper in trouble territory.

Cell C suffered yet another huge blow after two of its key shareholders were forced into a write-down of value in the telco.

The news got worse when Net1, which holds a 15% stake in Cell C, issued a statement saying it “believes the fair value of Cell C at 30 June 2019 (Net1’s fiscal year end) is nil ($0)”.

The Blue Label share price was R3.20 at the time of publishing this morning.

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